Insurance Contract Questions (Set Two) Flashcards
What is a contract? When is it not considered valid?
An agreement between two or more parties, where both are competent enough to represent themselves, to exchange things of value or refrain from doing a particular thing. It’s not considered valid if it requires one of the parties to do something illegal.
What is mutual assent?
When all parties agree to all the terms of the contract.
What three requirements must be met for a contract to be considered valid?
Serious intent, must be expressed clearly and in reasonable definite terms and must be communicated to the offeree.
What is the mirror image rule?
The terms expressed in the acceptance must be an exact duplicate of the terms expressed in the offer.
What is implied acceptance?
When the offerer is expecting an action rather than a promise, performance of the action is acceptance of the offer.
When is a contract considered accepted when it is done in person?
When the offerer hears verbal acceptance.
When is a contract considered accepted when it is done over the phone?
When the offerer hears verbal acceptance.
When is a contract considered accepted when it is done through the mail?
When transit is initiated / when it’s placed in the mail.
What happens when an acceptance is improperly dispatched through the mail?
It’s not considered valid until the offerer receives it.
What is consideration?
The exchange of things of value.
What is legal detriment?
The sacrifice made by each party.
What does legal detriment mean?
The party is doing something they don’t have legal right to do, not doing something they have legal right to do, or giving up something they have legal right to keep.
What is forbearance?
Refraining from doing something that you have right to do, like suing.
What is the need for bargaining?
To ensure that each party has the potential to suffer a loss if the terms of the contract aren’t fulfilled.
What are the three basic criteria for legal consideration in a contract?
Must be bargained for, adequate, and legal.
What is capacity? When is a person considered to have it?
The legal ability to enter a contract. The person must be well-informed and possess free will.
When are a person’s agreements voidable?
If they are severely mentally impaired or severely intoxicated.
When are contracts invalid?
If it requires a party to do something illegal. Also, if it includes agreements to obstruct justice, interfere with public service or defraud creditors.
What is an unilateral contract?
When one party promises to do something in return for the performance of a particular act. Considered accepted when the action is performed.
What is a bilateral contract?
Both parties make promises and an explicit acceptance is required from the offeree.
What is an aleatory contract?
Action being taken by one or both parties depends on whether or not a named event occurs. For example, insurance policies.
What is the difference between an aleatory and conditional contract?
An action must be performed or a condition satisfied by one of the parties before the contractual obligations of the contract exist.
What is an estoppel?
A restraint.
When is an estoppel applied?
When preventing one party from denying the existence of an agreement. Usually applied to prevent unjust actions from taking place.
